Few small business owners know the true cost of overseas money transfers through their banks
Small businesses are ignorant of how much overseas money transfers cost, research suggests.
A survey of 565 senior decisionmakers in small businesses with less than 50 staff finds that more than 80 per cent don’t know the true cost of foreign exchange through their banks, which charge between 3 per cent and 6 per cent for money transfers.
Directors of small financial services firms were even less likely to correctly identify the correct costs of money transfers through high street banks than their counterparts in other sectors.
Taavet Hinrikus, co founder of money transfer site TransferWise, which commissioned the research, says, ‘When even financial services firms don’t understand the true costs of international money transfers, what chance has the average entrepreneur got?
‘The fact is, the hidden foreign exchange fees charged by banks are hitting companies’ hard-won margins. Six in every ten small businesses mistakenly believe their bank charges less than 4 per cent for processing international payments. The real cost is higher than they think, and ultimately is eating away at their profits.’
Almost half (43 per cent) of respondents say they would find international trading more attractive if foreign exchange fees were more transparent and easier to understand, the research reveals.
This figure is even higher among manufacturing and technology businesses with 54 per cent and 58 per cent respectively said they would find overseas work more attractive if foreign exchange was transparent.
Only one in four (27 per cent ) senior decision makers say they think UK banks make it ‘clear’ how much bank charges for handling overseas money transfers.
Hinrikus adds, ‘Two years ago, the Office of Fair Trading told banks to make their fees for overseas transactions easier for consumers to understand by clearly showing them all the charges that apply. They need to do the same for small-business owners.
‘Banks are making it almost impossible for small businesses to understand overseas money transfer costs.’